America discuss migrants. What mcaleenan called for he described as concrete International Actions investigations and in traditions. Panama has been the bridge for migrants seeking to reach the u. S. Border. It is also a route for cocaine moving up from south america. Emmanuel macron gave Boris Johnson little hope he is winning to compromise on brexit. Macron told the british Prime Minister that any changes to the current deal will not be very significant. Johnson is demanding the eu scrap the backstop, the mechanism designed to keep the irish border free of checks. That is a key part of the agreement. The two men met in paris. Jeremy corbyn meantime says he will do everything he can to prevent the u. K. From leaving the eu without a deal. That includes calling a noconfidence vote in Prime Minister johnsons government. And if it succeeds, competing in the ensuing general election with a pledge to hold a Second Public vote on brexit. I agree with president macron. The question of the argus border is fundamental to a lot of things. The irish Peace Process was an enormous step forward. It is an international treaty, an international agreement. It cannot be negotiated away by Boris Johnson anybody else. I think president macron is quite right to say they will not allow a hard border to return in ireland. Mark speaking during a visit to a hellfire, Jeremy Corbyn warned of the damage that a no deal brexit could lead to jobs, services, and industries. He added that the principle is we will do everything we can to ensure that no deal is taken off the table. Global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Romaine from bloomberg World Headquarters in new york, this is Bloomberg Markets the close. Im romaine bostick. Caroline im Caroline Hyde. We are about 30 minutes from the end of the trading day. It has been a politically volatile one. , but something between gains and losses. The nasdaq has been the under performer on the day. Software companies coming out with earnings. Romaine quite a few, hp. Caroline oil has been selling off. Got the pmi number out of the u. S. Much worse than we received. More than 2009 over also money coming out of oil and gold. Safety really today. Romaine not a huge drop but still significant that it is dropping below the key technical levels. That can change tomorrow depending on what we hear from powell. The s p 500 staying in the green. We will see if it can hang in. It has been fluctuating between gains and losses. The dollar has been in a tight range all day long. The 1210 number. 1208 to 1212 has been the range for this for quite some time. Caroline the market is just bracing for powell tomorrow. Romaine absolutely. These are the homebuilders here. This is the main etf that tracks the homebuilders. Right now at a 62 week high. It has been on fire. I guess a lot of the sentiment seems to be changing. We got some comments out of the homebuilders and home depot and lowes. Some people are interpreting that as a positive sign for the industry as a whole. Caroline not bad this week. Romaine thats right. Time for our top calls. Cut top, Toll Brothers market perform from outperform at wells fargo. 39 price target. The analyst saying the homebuilder lacks the catalyst over the near to intermediate term to drive goals. Shares up 1. 9 . Next, oppenheimer cutting tiffanys. The price target down to 100 from 115 115. Weakernext, oppenheimer cutting Tourist Spending could hurt topline trends this quarter and next. Again, shares up 1 . Finally, etsy upgraded to buy from hold with a 70 price target. The analyst says the stock is trading at an attractive valuation following the recent share declines. Shares today up about 1. 7 . Those are some of your top calls. Caroline Software Earnings about to come thick and fast. In bracing for the key cloud providers. Embracing for the key cloud providers. Salesforce. It is interesting. We look to germany and the rival there. Not looking so pretty. What do we expect . Salesforce should not have any issues from china or the macro concerns. The booking date it was good in the last quarter, which generally translates going forward. We are watching for any macro comments that they come up with, but we feel microsoft and salesforce are two companies that are diversified and have a strong folio of products and should be able to do better than other companies. Romaine salesforce has been a darling for a lot of investors. They have managed to continue this momentum through a lot of acquisitions, but the acquisition made of Tableau Software and click software, investors were a little bit concerned about how those were pulled off. Anurag this is part of salesforces strategy for a long period of time. They bought a very Interesting Company not that long ago and then acquired tableau, which has been a very interesting acquisition. They provide products that are different from marketing, from commerce, to sales, to customer service. When you build on top of it Something Like tableau, you can visualize all the different data across different areas. You can see it in one go. That is why these two acquisitions are interesting. Over the next 12 months, we think it will add good revenue for the company. Caroline salesforce has a dominant scale in europe. We are seeing bny, which is exposed to europe. We got germany today and back to concerns. Is this putting off spending in the area . Anurag over the next one or two quarters, we should see some pullback in overall spending. Pulling back all cloud players a little bit and will impact companies. We view microsoft and salesforce in a better position than most other ones. It will be interesting for vmware it will be interesting for vmware. We will hear a lot of questions about that particular acquisition because it will have an impact on their margins going forward. Romaine questioning the financial ramifications of that deal, some of the Corporate Governance issues. What can they say to investors that will make them a little more at ease . Anurag anurag they will try to pitch the hybrid cloud strategy. Vmware wants to make sure they are in the game for the upcoming spending area. Caroline great that you spent some time with us before a very busy session for you. Be talkingwe will amazon because it is launching an offensive. Why the Worlds Largest retailer is helping thirdparty merchants with sales. This is bloomberg. Lets get you a quick check of the latest business flash headlines. The family and ceo of overstock. Com has resigned. Entanglements with the deep state. He released a statement saying he was part of a federal investigation related to any 16 2016 elections. Shares higher on the news. Apple is getting ready to unveil new hardware for the coming weeks and months. Among the devices, three iphones, ipads, and the largest laptop in years. The pro iphone will feature a new camera system. Reportgen is denying a it ceo would be interested in buying a stake in tesla. Vw calls the report unfounded speculation. Ceomagazine says the vw would invest in the electric carmaker immediately if he could. That is your business flash update. Romaine amazon is launching a 15 billion charm offensive. The Worlds Largest online retailer is planning to spend money to help the thirdparty merchants with sales. This as amazon continues to be sick for wielding too much power over its sellers. For more, lets bring in matt day joining us now from seattle. 15 billion. That is a big number. I assume amazon has something in place already to help the sellers. What is the increase we are talking about . Matt we really dont know. It is my understanding amazon looked all throughout their services and basically analyzed, what part of what we are spending on those folks and buildings is geared to our thirdparty marketplace . Tally all of that up. Figure that to be 15 billion this year. Amazon would not say because it is the first time it calculated the speaker before if it was up or down or unchanged from last year. It is largely to quantify exactly how much they are investing in an ongoing basis in the thirdparty merchants. Caroline i like that turn of phrase, optics. I hate to be a cynic, but any optics why they are doing this at the moment . Matt that is definitely part of the backdrop. Amazons thirdparty marketplace is getting more screening in the european union. In the u. S. , the federal trade commission is said to be talking to some small sellers who fell on amazons marketplace permit really. A lot this green he has been applied to the marketplace amazon has been deliberate in recent years in their marketing, saying we are a friend of the Small Business and here is how we are supporting sellers on our website. Romaine we talk to a lot Small Businesses that europe. We had Small Businesses at bloomberg. We had a couple on the program. Whatou give us some idea the sellers themselves are giving up in order to participate in this program . Matt complicated is a great word because of all the eyeballs and shoppers on amazon. Com. They loseses, authority of how they are communicating with customers. Thatnventory is managed let them use their Logistics Network get a lot of rules dictated by this very large platform operator on the part of amazon. Some small sellers feel like their voices are not heard. One complaint you hear often is if the seller does something wrong and gets suspended from selling on the platform, it can be kind of hard to get in touch with an amazonian to explain what went wrong. A lot of critiques that small sellers have had over the years as the marketplace has grown. Caroline i would like to be called an amazonian myself. How much do these outside sellers really matter for the business . How much are they bringing in . How much of the sales . Matt they are critical to amazon. 58 on the sites worldwide came from thirdparty sellers last year. By widgets,easured one thing the Settler Community does for amazon is they dont have to go out of stock. Everything under the sun, if they are ready and willing to do it for them. If they are charging fees and commissions as the sellers make deals on the side, it is a big business for amazon and what they want to continue to grow as mobley grow reasonably. Caroline great story and well put by you. Trouble between gains and losses throughout the day but holding onto 0. 1 higher. Focusing on the 10 year yield, because we are selling off slightly. The curve inverted twice again today on the 210. We are seeing it back in the negative. Is this a long battle for the fed . And the pound, check out. Up a percentage point. Once again, the battering of brexit and whether or not we will get a deal in question. This is bloomberg. From the 5am wakers, to the 6am sleepers. Everyone uses their phone differently and in different places. Thats why Xfinity Mobile created a Wireless Network that auto connects you to millions of secure wifi hot spots. And the best lte everywhere else. Xfinity mobile is a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Click, call or visit a store today. Caroline this is countdown to the close. Im Caroline Hyde. Romaine high romaine bostick. Is the hardest working person in showbiz, taylor riggs. Taylor giving me the most compliments this week. On a very serious note, there are a few things im watching. One of which is jackson hole this week. Particularly tomorrow when we get to hear from jay powell. What is so crazy if you come into the terminal at g tv , you had a lot of hedging going into this. A two to one ratio for puts to calls. Traders betting where hedging or protecting on bond prices down and yields up. And then it came up that we got three relatively hawkish statements from some of the fed Regional Bank president s, and then we translate that into the equity markets. I wanted to pull up another chart that we have showing the pricing that we get on the day after the symposium starts. And then of course on friday, what happens in the s p when you chairsom many of the fed. Romaine got to love the 2010 and 2011. I wonder what happened was days. Taylor vague, focused on general theories. You are still getting anywhere from half of a percent up to 3 in the equity market. Tomorrow, we will have to see. We know all eyes are on jay powell. Caroline we brace ourselves. None other than one issue, looking forward to jay powell, the banks. Check out what is happening in terms of Industry Groups because they basically rescued the industries indices. Yields rise a little bit. Hopes that maybe this ongoing search for yields will come to an end and the banks getting a bit of a lift. Romaine definitely on the red in the s p and the dow but we will take as we can get it. Taylor we were talking verted yield curve. Sort of surprising today. Caroline you are right. Not once, but twice. We have had one out performer. It has generally been the Dow Jones Industrial average. The s p 500 cleaning onto 0. 2 higher. Romaine there we go. Caroline there you have it. A lot of the hard work there. Romaine also seeing retellings. The biggest name in the s p 500 is nordstrom. Taylor you were noting this morning, following the conversation yesterday about target getting an upgrade as well. Hugenot seen a company like that gateway percent. Romaine we are a few minutes away from the closer we will dive deeper into the action with our markets reporters. Look atim taking a slack, which has fallen as much as 2 . Take a look at the intraday. Earlier, it rose the highest since late july but is now down. It has eight buy rating. Buy rating. Mkm raised the price target to 40. More digital organizations digitize workflows that this stock is becoming a lot more popular. In the second chart from you can see the stock shot up early after the ipo but has since declined. Safe stockysts Value Proposition is even more attractive now that the company has a few more users. Abigail earlier today, we had some Economic Data come out. The u. S. Pmi data, the manufacturing surveys. You can see we saw a few misses for manufacturing. A contraction at 49. 9 versus the survey calling for 50. 5. Anything above 50 tells you the economy is expanding. Below, contracting. Manufacturing sector is contracting. Butice is slightly above missing the survey number. Overall, 50. 9. So expanding but not perhaps to the degree some would expect or hope. Interestingly enough, falling below the european pmi. This goes back to 2016. Back in 2016, some are calling it a recession in the u. S. Inside the u. S. , we had a correction for stocks close to levels we are at now, around 51, and then climbing and climbing. In blue, the european pmi. In white, the u. S. Pmi. A year ago, closer to 54. Now europe at 51. 8 and the u. S. At 50. 9. You have to wonder where the economy is hurting more, here or in europe . Caroline certainly looking at german manufacturing, it was pretty ugly. We thank you. What a great set up. With more, we are joined by luke. How has the market been digesting today . Mixed messages from the fence because as well. Seems like the market is waiting. Luke in a sense, yes. One trend i have been picking up on lately is the u. S. Data does not matter to markets. Any kind of European Data that is upbeat or a miss matters a lot to treasuries. Bad news in the u. S. Matters to treasuries. When we have seen today is better than expected but still bad European Data. Hey, if it is able to lift bund yield, it will lift u. S. Treasury yields. You see the dip on the day when we get the disappointing market menu print there. And then we bounce back up and drift up because that is what german bund deals were doing. The past six months, the correlation between the 10 year bund yield and treasury yield is 0. 99. They never moved together like this. This is a huge convergence happening at the backup of the curve. Taylor what do you make of a put call ratio to hedging on treasury futures looking for price, lower yields higher . Is that a sign that analysts are protecting to the downside . Or are they betting that more hawkish comments would start to come out as retail sales, the consumer still very strong . Luke what i wonder about is in a lot of these excerpts we have seen, what kind of fed response, what kind of big powell move triggers it . If you remember, the cut is when we saw a huge 210 flattening that sent yields down. There is the potential for more hawkish than expect to talks gets flattened against the curve yield down. Powell is sufficiently convincing in the idea that the fed stimulus will be able to help the economy and that is what forward curves are still banking on. To your point on the optionality, what has been interesting is if you look ats cue from a different way, essentially the demand for a call option on treasuries relative to puts, that has been so firm for a long time, and that is something we have started to see come in with the open interest charge so pointing in the same direction. Romaine lets bring someone else into the conversation. Alicia is a chief strategist. Welcome back. Always great to have you. Jackson hole tomorrow is all everyone is talking about. We had jim on earlier who basically said he should just capitulate to the market. We had Mohamed Elerian on earlier this morning on jon ferros show which is not as highly rated at this one, and he said powell should push back. I think tomorrow, you will have powell disappointing market because the markets are really looking for another 50 basis points by the end of the year. What we heard today is there is real disagreement within the fomc about where the u. S. Economy is, particularly the fact that the data has been stronger than one would expect. I think this is set up for powell to disappoint the market. The market wants more than the fed is going to give here. So, as we count down to the close, we managed to see overall resiliency to the market. Are you expecting to be a pocket lower . Where do we go with the s p 500 in terms of a negative reaction . Alicia i will look past tomorrow because you have a lot of Interesting Data coming out. September 1, some of the 10 tariffs, 100 billion worth of goods. And then you have the fed meeting. And then youve got the october 1 vat position tax in japan. You have the october 31 brexit decision. You have some really market changing moves ahead of us in the next two months. Fed, it is not that it is the least of our worries, but it is one of our worries. The market is time to push the fed further along than i think the fed wants to go. Taylor how do they break that cycle . How does powell continue to distance himself from a market that once cuts were addicted and so he delivers cuts and the market wants more . How do you break that . Alicia alicia you saw the change happen in january. Powell gave a speech were essentially he said, we are going to be patient. We are going to wait for the data, and we are not on autopilot. That gave the green light for the market to start pushing the fed. So the question is, is tomorrow the line in the sand . Is tomorrow the day where powell says the economy is put a good . There is softening of data. We would be open to cutting, but we dont see the disaster the bond market sees. The bond market sees a disaster. Caroline we are down now. We had been higher. We got very low volumes. Down by 23 on your average over the last 20 days. A lot of folks want to wait to see what he says. Whether he will give the red light or green light. Againstwell pushes back the market tomorrow or today, they cant wait until september 17 and 18th. Tomorrow is the day. We have heard this all week. Cautiously optimistic, but holding mostly defensive. You are seeing that in sectors like real estate, staples the upper former. Cautiously optimistic, but maybe a pivot. Romaine we should point out that tuten is reinverted. Is reinverted. Lets dive in deeper. I am looking at a couple of metals that had been roiled. Talking abouts weaker numbers from manufacturing, as well as labor market strength. The slipped by. 5 during session, heading back toward july lows. Copper is also lower. Its lowest since august 5. Analysts are saying the market is paying less attention to metals, more to the fed and jay powells speech. I am taking about stocks and bonds. Stocks you go into for growth. Bonds you go into for yields. That is not the case right now. Stocks are yielding more than the 10 year yield. 1. 61 . This chart goes back to the recession. Its the difference between the five year dividend yield and the 10 year yield. The s p 500 is yielding more. During recessions, they going to defensive sectors such as staples and real estate. Stocks are doing well and promising, we see the bonds will yield more than stocks and investors build toward more growth sectors like technology. That has been the case for the most of the last 10 years. Right now, we see the s p 500 yielding more. Romaine thank you. Quick breaking news. Earnings being reported. When they are looking ahead to the first quarter, they are lowering or giving a forecast that is sort of estimates. They are standing by their fullyear forecasts. A range of 7. 4 billion. Right on the nose of what analysts were expecting. I want to bring you back in here. The rotation between equities and bonds. Does equity have more room to run if people continue to go from bonds to equities . I think you are reading it correctly. We want to remind our investors that a well diversified portfolio is the right choice. For yields to move lower. Place you gos the for return or yields. It will pressure yields here. We believe investors should be in bonds. Yieldstes so low and several wrote low, we think echo these are fine. Equities are fine. We dont see a recession coming here. Caroline you said you like to remind people to be diversified. We are just hearing from romaine about intuit, we are waiting for salesforce. Where do you want to be put in tech . Alicia i like cash flow generating u. S. Focused companies. I think software is fine. We have been negative on health care this year because the regulatory pressure coming from the democrats and republicans. This could be a really interesting entry point for the health care stocks. Dividend yielding stocks are an ok choice. Would look for the places where the market has not rushed for safety. Romaine we are talking a lot about yields. The market is playing close attention. We saw the tuten yield vote yield curve, reinverted. We were down about 23 basis points. What is that telling you . Based on how it has been generally moved toward inversion, it is saying more about the longterm than the shortterm. That is the case that it has been driven by the long and. Caroline hp is making a change the top. Enrique loris. This is a man who has been head of the business since 2015. This essential hp since hp split from spe. Lores is taking over from imaging and printing. We will see a continuation, someone who has been in the business for a long time. Romaine salesforce, their earnings are out. Shares higher here. They are beating on the top and bottom line. Also given a forecast. 16. 9 billion is the range. Thats above the range of what analysts were expecting. Taylor i think we cut you off before. What are you seeing luke and yields, in yields, the thing to look for is the positive correlation between fiveyear yields and stocks. You remember, lower yields are great and they boost valuations. Now we needed higher real yields for stocks to go up. If you are thing of something that can break that relationship, it is dovish remarks from a fed chair. Yields down and stocks that. I appreciate alicias point. We could be set up for disappointment. The fed speakers we have heard in the past few days are not a preventative of the committee. Companylike a preannouncing that guidance ahead of earnings. Alicia i would agree. We think the tony five basis point cut is in the bag for 2018. If we get another 75 points, i doubt that. We think we get the cut anyway. Caroline what about Global Opportunities . When youre looking at the pmis out of europe, better than expected. When you are saying the u. S. Is where you want to remain, is there no opportunity in emerging markets . Is staying home the safest . Alicia it depends on your risk profile. There are certain economies that look interesting. Makes go, brazil, india. Having said that, the global risks are so high, that if there is any pickup in china on the growth side or the currency side, all the emerging markets will be tainted by it at some point. China is such a huge part of that index. Averse, best to stay in the u. S. For now. Now, it is interesting. Flows, the flight to safety on hedge, but also thing about the credit flows and how much yields have come down. , its got andging appeal. Has you win, tails you win. Caroline thanks for joining us. Lets return to the breaking from hp. They announced their numbers and give a profit forecast that was in line with forecast. The cost cutting measures are paying off. The key news is the chief executive is stepping down. Lorse e lores will be the successor. Also in the tech space, Software Company set salesforce beat weather secondquarter metrics in terms of revenue and eps guidance. Billioncoming at 4. 4 4 4. 45. Thats above what analysts were expecting. Also boosting the revenue forecast. The guidance 2. 5 above the analyst estimates. Taylor taylor that is it for the closing bell. And weu messes up next will what did you misses up next. This is bloomberg. Theoline Caroline Hyde stock market is closed in the red. Has closed in the red. Romaine but whatd you miss . . Whatd you miss . Week world demand. Trade takes its biggest toll on u. S. Factories as germany factors are reinforcing beliefs that the Worlds Largest economy is heading into recession. The ceo of overstock resigns after making bewildering claims last week about entanglements with the deep state. Lets get you up to speed with earnings. Hp came out with its numbers and it seems its cost cutting is working. We are seeing it in line with its profits. Chief executive who has been at the helm since 2015 split is leaving the company to attend to a Family Health matter. Enrique lores will be taking over. He has been serving at hp a long time. Salesforceu can see shares are up 6. 5 after hours. Revenue, upbeat. They gave a fullyear guidance for the revenue. Its about their previous guidance. Also saying their fiscal Third Quarter revenue will be above the average of what analysts were expecting. Taylor off the top of that, you have intuit up 5. 5 . Same thing, looking into 20 20, revenue coming in higher, raising the top end of that. For the current quarter, youre getting a topline beat and a bottom line miss. Its all about the guidance for the top and bottom line, coming up better than expected. The view from out west. The Federal Reserve is holding its symposium. Chairman powell is set to speak on friday. This is shaping up to be coming one of the biggest meetings in years. As i look at where the economy is, its not yet time. I am not ready to provide more accommodation to the economy without seeing an outlook thats just the economy is getting weaker. That suggests the economy is getting weaker. Michael joins us from wyoming. We know she is a dissenter. Fromve been hearing another who wants a hold right now. Are those views reflect above the rest of them . Michael i dont think they are reflective of the fomc. There is a group that questions the need, given the Economic Data, to go much lower than they are with the federal funds rate. It isnt demand with the cost of capital that is the problem here. It is concerns over the trade. In those are things that Monetary Policy cant fix. If you use your tool, we dont have anything left over if we do slip into recession. While we are still a ways out from the decision, it isnt going to be a slamdunk. Its not a unanimous event going into that meeting. It will be adjusting to see whether he uses his speech to rally troops to the cause or keep things status quo and keep the markets believing that a chance for a rate cut is still there, and he will work on members of the open Market Committee as time goes on. Taylor we have been speaking with market participants. People have been saying tomorrow is the line in the sand for jay powell to break the cycle of becoming market dependent or fueling what the market is pricing in terms of rate cuts. Do you agree echo is tomorrow the line in the sand that jay powell needs to take . Michael its probably a shifting of the line in the sand. Look at what happened in december. The chair said the fed was going to do what it was doing. That was enough to send markets into spasms of angst. He came out and a red line was that he had to sit the fed was going to go on hold. He did, then the markets decided we needed rate cuts. They pushed him to do that. At some point, he has to push back. The idea pushing back and saying no more rate cuts right now, when the world is very uncertain is probably not fair. I dont think that will happen. He would say, maybe the same thing he has been saying, that the fed will act as appropriate to keep the economy going and keep the expansion continuing. Taylor acting as appropriate are the words we never get sicker. Michael reporting from jackson hole. We are not dealing once waiting on jay powells speech. Fx traders are getting desperate for guidance and are searching for differences outside of changes outside of jackson hole. He with more another the currency markets are digesting is our guest. We want to start with calls on the dollar. We have heard this morning, it is Dollar Strength, theres no reason the dollar should weaken, despite perhaps fed cutting. Do you agree . Absolutely. I have been resolute in my strong dollar call. Fundamental support a strong dollar. People have been clamoring for lower rates. We need to cut rates. The reason we have good rates is because we have a Diverse Economic associate situation. We dont require zero rates at this point. Europe is much worse off. Japan and u. K. Japan and u. K. If you dont like the dollar, where else are you going to go . Everywhere else looks shakier than what we have here. Romaine how confident are you in the Market Forces and keeping the dollar how it is, given the Political Forces that want to see it different . I have been doing the stuff for almost 30 years. Sometimes, there is that shocked at the very first time. To thegoing back Interest Rate differentials. Fed cuts one or two times, we are still much above and the ecb is cutting and the boj is likely cutting. Despite this desire for we can currency, its not justified. I like the economy where it is. Everyone is worried about the u. S. China trade war. Trying to find out how to incorporate trade pension into the functions. The first best option is to get rid of the tariffs. With these bouts of the yen and the frank are coming back in. Will they remain so even with this Dollar Strength . I would put the dollar in that haven group. The swiss franc, the Japanese Dollar and yen are positioned to outperform in this environment. A lot of it has to do with the carry trade. Short yeneople are and long em. And theyre getting out of that trade. Thats why it was getting a violent selloff in the em that goes along with the yen strength. Something to look out for. Taylor when youre talking about dollaryen, does it still have that safe haven status it wants carried . And what level does the boj get nervous . Below the 10480 level, that is the flash crash in january, theres nothing to keep it from getting down to 100. At this point, it will probably be up to job owning. The debate is when and if the bank of japan would ease. Comeare thinking it might after the consumption tax hike. The last thing they need in japan. Caroline moving away from currencies affected by Central Banks and those affected by policy, the Great British pound. Actually up today. Angela merkel, headline risk, she seems to think that maybe, she hinted to a deal being done before september 31 october 31 and whether that could escape and no deal is anyones guess. Its really a matter of guesswork because it is political. I wrote a piece that established different scenarios. A 50 chance of an extension. 20 for a compromise that allows for a deal brexit. 60 for a hard brexit. 5 of a second referendum. Is thereng consensus will be a no deal brexit. The irish backstop is a dealbreaker both sides. Mr. Johnson is talking very tough. The eu has said, we have negotiated this deal and they are not going to compromise. The headline say, maybe they will compromise. Miss merkel are some of us compromises, and they say would get back to the hours backstop. Thank you. We want to bring in some breaking news. Up 4 . A 3 drop in forecast. Are not yet cutting the fullyear top and bottom line. I would note, old navy, which was the star performer, off 5 . That is worst were some estimates, down 1 . Romaine there was news that they were going to buy pivotal. They announced they were buying Pivotal Software for blended share price of 11 11 17 a share. They said they were also going to buy carbon black for 2. 1 billion or 26 a share. Carbon black closed less than 23 a share later in the day earlier in the day. Caroline lets return to the hong kong protests and disinformation. We have heard from youtube they have disabled 210 channels for hong kong disinformation. More that a bit later. Taylor want to bring some breaking news we are getting on gap. Total sales for the company are falling 4 . Fallingworth estimates about 3 . As we dive into the individual brands, old navy, wants once the star a performer, looking at sales declining 5 . Worse than estimated 1 drop. Gap brand falling 7 , right in line with estimates. Banana republic comp sales falling 1 more than estimates, a decline of about 3 . Romaine lets look at vmware. The reported earnings about two acquisitions of Pivotal Software , 11. 71, the blended share price. There also reporting carbon black for 26 a share. Both of these deals announced after hours. Caroline breaking news on pepper peg. Being part. Entertainment one is going to be purchased by hasbro for 4 billion. 3. 3 billion pounds. 30 premium. Pig will be added to hasbros growth outlook. Well see how these deals are digested in new york. 1 this is bloomberg. Sayse iranian president calls with United States are useless. President rouhani made the comments after the unveiling of a missile system. In televised remarks, he said now that our enemies do not accept the logic, we cannot respond with logic. Officialsand security met in panama to discuss fighting Drug Trafficking and migrant smuggling. The Homeland Security secretary described what steps the u. S. Would like to see taken. Is a regional challenge. And activityions crosses borders. The only way to address that is working together, information sharing, concrete investigational actions, and introductions. Panama has been the bridge for migrants seeking to reach the u. S. Border. Panama is also a route for cocaine from south america. In brazil rain forest is burning at a record rate according to data from the countrys institute of space research. There was an 84 increase in fires between 2018 and this year. Sustaining forests is crucial in our fight against climate change. All forests are essential for the health of the world. Communityational recognizes the importance of the forests, the amazon, the congo, and in indonesia. Brazils president says nongovernmental organizations could be setting the fires to community recognizes the importance of the discredit him, but offered no evidence. A key cooperator in Robert Muellers investigation testified today in a foreign lobbying trap of attorney greg craig. Last year pled guilty and agreed to cooperate with prosecutors. One concerns obama counsel craig, who is accused of concealing information from the Justice Department about work he did for the ukrainian government. Arened parenthood clinics charging fees and fundraising, and also warning that more unintended pregnancies and sexual disease after it federal from a planning program. Planned parenthood quit the program rather than comply with the new rule. Global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. I am mark crumpton. Hp has reported earnings. Lets welcome ian king from san francisco. The numbers looked online line for this current quarter, but the ceo is leaving. Thats correct. I spoke to him about this. Personald us this is a decision and has nothing to do with the business. He has to go back to our straight to take care of a Family Health issue. Involved inscandal this particular situation. We were looking at the stock earlier. It involved has almost doubled e spinoff in 2015. As far as the printing business, how good of a shape as the company in right now . It has been doing ok. It has been on a path for more profitability and low trajectory growth which has kept the market heavy. The Biggest Issue the incoming ceo has is the printer business, which is suffering from thirdparty companies and suppliers out there offering cheaper toner and cartridges for hp printers. That is something the company has to address, either ip protection or lowering prices. If the shareing price reaction has to do with the incoming ceo, who is already looking at big changes to the company, announcing plans that a comprehensive global view of the Company Strategy and business operations. Any idea what this broad overview might look like . I asked him and he would not tell me. Said andage in what he what they said in their statement is repeated, emphasizing the reduction of costs, and that generally means reduction of headcount and other elements to bring the bottom line into a better position. He really has to address that printer business person foremost. They said it would be down 3 for the year. It is on trajectory to be worse than that. Thank you. Turning to other earnings, gap reporting. Our analysting in from princeton. Walk me through the disappointment we are seeing. Navy d like cap, old navy, Banana Republic lower than forecast. Yes, the Old Navy Comp was down 5 , more than expected. 7 , but in line with consensus. The biggest disconnect was weakness in Banana Republic and old navy. Romaine old navy had been the bright spot for gap. What happens if old navy is on a down trend and this is more than a onequarter blip . What is the outlook . Gap is struggling to get the product right. Banana republic has had this issue. With old navy, it is just surfacing again. I dont think it is the value arena. I think value is still doing well. We saw that with ross, tjx. The customer is seeking value, but given the decline on old navy, it seems like the product was missed and they need to fix that. How do they go about fixing it . It looks like theyre saying it is a challenging environment, but they are confident in the strength of their brands. Is it the environment they will blame . Do analysts need to see a wholesale change . And old navy, they cant blame the environment anymore than they have been, especially old navy. Traffic at stores is down, but that hasnt persuaded customers from going to stores they love. It comes back to execution and that they have to fix the brand and the marketing behind it. That really goes for gap. For old navy, it is not a bad thing to look at the price points in the product assortments, the colors, to make sure they are resonating with core customers. Romaine thank you very much. We will stick with earnings and jump to the tech sector. Salesforce and vmware, vmware buying carbon black and pivotal. We knew about one, not the other. Lets bring in our software analyst. Deals,look at these two they dont look completely crazy, but out of left field. Their core product was on the decline and they made acquisitions to add ancillary products. Since the last two and a half years, growth has been good. Leg of this is the next new products coming out from vmware. I. T. U talk about legacy and cloud for this enterprise, where does vmware fit in in terms of transitioning and keeping customers, and how did these new deals helped him with that as well . Vmware was supposed to be a dead company. It was supposed to be that everything moves to public cloud and there is no place for vmware , then they did a partnership with aws. Since then, life has been good for him, even though we dont have huge financials from the partnership. People have been investing a lot in vmware products. Product. A new the last few quarters, eight to 12 quarters, they have done well in terms of selling the core product and ancillary products. Now we get more products they ell into the next leg of growth. Caroline salesforce looks as though they proved the acquisition streak is working for him. Is a diversified Software Company with a lot of products that interact with each other from a crossselling that can happen, and we think over the next 12 months that this company has the ability to weather any downturn. We talk about tech i. T. Spend and Business Confidence waning, while Consumer Confidence is strong. Broadly speaking from the company to cover and speak to, where is tech spend . Does it feel strong, for our business pulling back on how they allocate dollars . So far, good. I think vmwares call will be important. Their licensing number talks about future growth rate, we think things will slow down over the next 12 months, but software is one area within technology that is one of the strongs areas of investment going forward. Thank you. Wonderful breakdown. Coming up, lackluster Global Demand and trade tensions are leading to the first contraction in u. S. Factory activity since september 2009. What that means ahead of the september rate decision. This is bloomberg. Cracks forming across americas manufacturing foundation. , we will take a look. Lets start with the u. S. It was below 50. That is what matters. 50, it is in a contraction, so it is an official confirmation that may be the sector is in a recession right now. The overall mean economy is in recession, so we have seen weakness in many factories, different indicators, including payrolls. You saw a significant deceleration in the pace of growth in the sector in the last few months. As long as the consumer is ok, i think this economy will be in ok shape. This isnt a dumb question, we talk about the composite pmis, manufacturing and services. Manufacturing gets the headlines. It fell into contraction territory. There is also the services number. What should we be watching more . Both. Manufacturing comes up first and is a big leading indicator and shows where sentiment is, and you look at the other regional surveys. Regional t regions compile their own indicators. In august, we did not see a , soificant deterioration two help locate given what has happened since august if we are in this territory, things will not deteriorate so much. Romaine you talk about the consumer side. We did get decent job stated. Not bad. Relatively good retail sales data. Were getting evidence from retail earnings that people are still spending. Right, but all this data was for july. The caveat is we are in august, and in august, we saw significant deterioration in the university of michigan index of sentiment. Will it spill over into real activity . It is a big question. Whether it sustains that were not, we will see. We will get the data on the Consumer Confidence survey next week in the final michigan reading, so we will see whether this is going to be sustained or not. Caroline something the fed will be talking about . Yes, all of them. We have heard from them already today. Some of them mention the Consumer Sector has the key to this economy. Caroline it will be a busy day for you tomorrow. Lets get a check at the business flash headlines. Bloomberg crunch the numbers for we work in london. Of the squarelf meters recommended by a British Trade group. A first for capital markets, if you have 10, you can invest in an ipo in japan if you buy the shares through softbank. The business is preparing to offer such sales as early as next march after getting regulatory approval. You buy the shares through softbank. Japanese brokerages are trying to entice younger investors. The ceo of overstock has resigned. Entitlementsims of with the deep state, releasing a statement he was part of federal investigations related to 2016 elections. He founded overstock in 1999. The shares cheered the news. Suppressed after last week. Romaine they issued this letter on an official prnewswire, so it had to go through their Communications Office where he referenced many black, have been visited by men in black, government agents, about his potential involvement in the whole russia investigation with regards to the u. S. Election. He was apparently involved in a relationship with one of the key figures. He referenced two previous investigations, one involving the murder of someone he knew. It had nothing to do with the business of overstock itself, so it confused a lot of people. The shares sold off. He has a long history of making comments that could be construed as being often normal path. Rising, sohares perhaps headwinds being pushed aside and getting back to business. The street is next. On one hand, people thought this was a dramatic flair that was no longer conducive to running a business, and other analysts saying he will go down in history for his early investments in blockchain technology. The street is still out. Romaine ok. Caroline fascinating the way this has unfolded. We will have more on that, eventually. Coming up, south korea calls it quits, despite words of warning from the u. S. This is bloomberg. Caroline time for a look at what is trending. Bloomberg looking at socgen, the french bank weighing alternatives to a unit, including sale emergent amid heavy competition. Twitter is reporting on apple getting ready to unveil a basketful of hardware. Among the devices, three new iphones, upgrades to ipads and its laptop. The main features of the pro iphone will be a new camera system that can capture ultra wide photos and videos. Abouterg. Com has a story shutting down state beaches in the summer as a city prepares to host a g7 summit. This comes at a cost for local businesses who depend on tourism for revenue. Deploy 13,000 officers in anticipation of protest. So much for the surfing down there. Now you can follow the stories on bloomberg. Com, twitter, and tictoc. S scrap south korea of the deputy secure director saying they will withdraw from an intelligence sharing agreement with japan. The move comes despite urging by u. S. Officials to work it all out. Ets bring in shery ahn this came across the wire early this morning. Thesems Significant Companies would end this pack. These are two of the strongest allies the u. S. Has in the asiapacific. This information sharing agreement is being scrapped because they dont plan to renew it november was renewal comes up. This is fascinating because i cover the protests in south korea in 2012 when people were opposed to this deal going into place, because south korea was not happy with there was persimmon over japans treatment of south korea during colonial times. That was scrapped in 2012. It finally got enacted in 2016. South korea is saying they will axe it. What are the political ramifications for the u. S. . When general said the u. S. Wanted moon jaein to stay in. Now that they have pulled up, do we not have the negotiating powers we once did . We have less leadership in the region because these historical tensions and territorial issues between south korea and japan is nothing new. It is always south korea, japan, china, then you have the u. S. That is the adult in the group come in and try to mediate the relationship between japan and south korea. You are seeing less leadership now, so this is having an impact. A spokesperson from the pentagon came out and said this is theettable, that administration has withheld its isewal of info sharing that key to policy and strategy. And the u. S. Rea, have a trilateral intelligence sharing pact, but it is not as expensive. Theline this builds on export restrictions, relationship unfolding. Remind us what is behind that. He said it goes back to colonial times. Seven decades ago, but the resentment is still there. We saw japan and south korea taking each other off their trusted export partners list. That is just more complications exports, moreto expert licenses needed. This goes back in history because there have been issues where japan has tried to express and apologize for the colonial times, and south korea has continued to say this is not enough. Treatylaims the 1965 between japan and south korea settled things, not to mention a victims fund they set up. We are talking about two groups of people victimized during those times, so this is going back to the courts and south korea and is an issue that is still alive. Caroline the emotions run deep. Thank you. , watche on these stories bloomberg. The speech we have all been waiting for, Jerome Powell speaks at 10 00 a. M. Tomorrow new home sales for july are also out tomorrow 10 00 a. M. Romaine more retail results, footlocker reporting secondquarter earnings before the bell. Caroline that is all for whatd you miss . Have a great evening. This is bloomberg. This is bloomberg. Emily i am emily chang in san francisco. This is bloomberg technology. Down, citing steps Family Health concerns. His replacement is a 30 year veteran. What it means as the market stagnates. Plus, iphones are coming. Apple will unveil three new iphones and more